Finance Connect: “Buy Now, Pay Later” for Insurance

Since the start of the COVID-19 pandemic, e-commerce customers have grown increasingly familiar with “Buy Now, Pay Later” (BNPL) options at checkout – the modern equivalent of installment plans. Companies like Affirm and Klarna have become globally recognized brands, as a surge in online shopping coupled with low interest rates helped the top 5 lenders in the space grow 970% from 2019 to 2021 (source – CFPB).
 
For the insurance industry, the use of outside financing to help amortize large annual premium payments is nothing new. Most carriers require upfront payment of the premium, especially with more expensive policies. Most commonly referred to as “premium financing,” Premium Finance Companies (“PFCs”) have been working with agencies and brokers for decades to create payment flexibility and additional revenue opportunities.
 
“We believe that the ability to finance premiums not only helps the insured with more attainable coverage and payment terms, but it’s also a core function of our business model,” said Dani Harris, Chief Administrative Officer at Treaty Oak.
 
“Our insureds always finance,” Harris added. “Since we’ve been in business, we’ve only had 2 (customers) pay up front.”
 
Recent inflation-driven economic changes have further underscored the value PFCs bring to their insurance payments ecosystem. Many consumers and businesses have noticed their monthly insurance payments going up. Average auto insurance premiums rose nearly 14% in the last year, according to a Bankrate study (source), and sharp increases have been felt industry-wide.
 
ePayPolicy believes the collision of these three trends – inflation-driven premium increases, customer preference for payment flexibility, and ongoing utilization of premium finance – will drive rapid adoption of their newest product, Finance Connect.
 
“We’re so fortunate to have many insurance customers that regularly tell us what would make their life easier,” said CEO Mark Engels. “The relationship between PFCs and their agency partners is an essential one, and we’re building something that makes it even easier for them to work together.”
 
Finance Connect enables insurance companies to offer premium financing options – with their existing premium finance partners – at the point of online payment for their insured customers.
 
“The financing offer and terms are presented right at the time of payment,” said CTO Nish Modi. “We’ll then leverage our existing integrations to streamline recurring payments and payment reminders. Finance Connect is going to help insureds pay faster and bind policies sooner.”
 
Traditional BNPL options have been estimated to increase conversion rates by 20-30%, as well as increasing cart value by 30-50% (source). But unlike new BNPL entrants, many PFCs have long standing existing relationships with their partners, and need no justification for the value they bring. 
 
“Central to the creation of Finance Connect was our intent to preserve existing partnerships with PFCs,” added Engels. “We didn’t want to try and take business from them, or create a marketplace. We want to help both sides work together faster, for the convenience of the insured.”
 
“We’ve signed up several PFCs on the platform, with more on the way,” added Engels.
 
The emphasis on removing manual chokepoints in insurance payments has been central to ePayPolicy’s product roadmap. Finance Connect is the latest integrated product for an industry in need of greater digital efficiency and automated back-office operations. ePayPolicy recently introduced CheckMate, an automated check acceptance and reconciliation solution that utilizes machine learning, and announced the Payables Connect tools for automating the reconciliation, creation, and payment of market payables.
“Insurance companies of all sizes are dealing with some tough market conditions, looking for ways they can add to the bottom line,” said Engels. “We’re going to give them more control of their revenue stream, from receivables to payables, with as little disruption for them and their payers as possible.”